MS Removal Tool Hoax software

My wife's computer got infected with the removal tool hoax software that disables everything. We couldn't make the uninstall process work so ended up doing a factory reset. And then my daughter on another computer encountered the same hoax dialogue boxes and we just caught it in time before she downloaded the hoax software (nightmare!!). All they were doing was copying images for school work. Is there an increase in this particular virus/hoax attached to clip-art sites and downloadable images??
Has anyone had this and found an easy way of removing it??
That's half of my bank holiday gone!!!!!:-(

Install and run Malwarebytes, keep it updated and run full scan at least once a week. This should help keep your pc's clean. It is a free version. http://www.malwarebytes.org/products/malwarebytes_free

Most of the fake av /spywrae apps disable the use of Applications like malwarebytes and your AV and things like task manager ect

So ...

The easiest way to remove these fake AV /Spyware Apps is to look in C:\documents and settings\All users\Application Data and look for a oddly named folder eg 144343535 rename the .exe to .bak and reboot the machine because the file is no longer running everything should be back to normal. At this stage i run malware bytes to remove reg keys/left over folders ect